The Bank of Japan decided to introduce monetary easing with a negative interest rate in order to achieve 2 percent inflation at the earliest possible time.
The policy board of BoJ voted 5-4 to apply -0.1 percent interest rate on current accounts that financial institutions maintain at the bank.
The board said it will cut the rate further into negative territory if judged as necessary.
The BoJ also decided to hold its target of raising the monetary base at an annual pace of about JPY 80 trillion.
The central bank downgraded its fiscal 2016 inflation forecast to 0.8 percent from 1.4 percent. Meanwhile, the bank slightly raised its growth forecast to 1.5 percent from 1.4 percent.
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